Property Sector: Cautious on S-REITs; reallocate to high-end and growth themes (Cont')
Deep value can be found in high-end developers
- In our view, value is emerging in physical high-end homes, which suffered the brunt of recent cooling measures.
- In particular, the additional buyer stamp duties (ABSD) had likely suppressed buyer demand significantly.
- We see attractive risk-reward in deeply discounted highend developers with healthy balance sheets, and believe excessive pessimism has been priced into their equities.
- While the timing of curb reversals (if any) is uncertain, we highlight that the authorities have a track record of actively reviewing property legislation and we view reversals to be a possibility when overall prices decline more than 10%.
- Our high-end developer picks are WingTai [initiate BUY, FV: S$2.58]; Wheelock (S) [BUY, FV: S$2.27] and OUE [BUY, FV: S$2.69].
Favour specialised players in strong growth segments
- We also like real estate segments with strong outlooks for demand-driven growth; in particular, we expect significant long-term growth for modern logistics facilities in emerging markets, such as China and Brazil, given demand-supply gap in infrastructure supporting e-commerce trends, and for data centre space in key hubs given surging data creation and storage needs.
- Top picks are GLP [BUY, FV, S$3.07] and KDC REIT [initiate BUY, FV: S$1.24].
(Eli Lee)
